Governments typically do not require a reset after merely 12 weeks in office. However, the British Labour Party entered a conference this week, which should have been celebratory, facing declining approval ratings and consumer confidence due to political missteps and overly pessimistic messaging since its landslide victory in July. Speeches from Chancellor Rachel Reeves and Prime Minister Sir Keir Starmer, which were more optimistic and confident, may help to steady the government. Nonetheless, further efforts are necessary to bring its agenda back on track.
The initial step for Starmer should be to “take back control” by instilling the discipline that characterized Labour’s election campaign into the government. It is essential to promptly fill vacancies in key Downing Street roles. The Prime Minister requires a competent and trusted team to commence serious policy implementation and make quicker political decisions. Although ministers might consider the recent controversy over accepting “freebies” like clothing a minor issue, especially following Tory-era excesses, they underestimated the impact on public perception.
A second crucial task is refining the communications strategy. With lingering market mistrust of Labour, especially two years after Liz Truss’s ill-fated mini-budget, the government must adhere to its fiscal discipline commitment. Simultaneously, it should avoid creating undue pessimism that could unsettle businesses, investors, and households. The Chancellor’s recent indication of potentially adjusting fiscal rules to permit higher capital expenditure brought a positive tone to the message.
Meanwhile, the Prime Minister’s promise to be forthright about the difficult trade-offs in governing was refreshing, particularly after years of Tory “cakeism.” This approach of making unpopular decisions rather than offering simplistic but deceptive solutions counters right-wing populists. Nevertheless, trade-offs should be selected prudently. For instance, agreeing to costly pay settlements with rail unions while ceasing winter fuel payments to pensioners may appear contentious to many.
Starmer, the meticulous former prosecutor, should not overlook what Bill Clinton referred to as the “vision thing.” A government that won with a relatively small share of the vote still needs to clearly articulate its core purpose. The Prime Minister partially achieved this by discussing a forward-looking NHS, secure borders, clean energy, and new homes, roads, and schools. However, he must integrate these elements into a cohesive Big Idea.
Regarding the need for a more active government in Britain, Labour must proceed with caution. The UK requires a government that ensures the development of hospitals, prisons, housing, and functional trains, as well as necessary investments. However, this often should be in partnership with private businesses and funding. The objective must be to construct the infrastructure for investment and entrepreneurship to flourish, enabling growth without excessive government interference.
Businesses embraced Starmer’s Labour in the lead-up to the election, recognizing the value of stability and a growth agenda. However, they seek more dedication to the needs of private enterprise. An upcoming employee rights package, which many companies fear may overly favor workers, will be a critical test.
An investment summit and Labour’s first Budget next month will provide further chances to reassure businesses. After reiterating the rejection of tax increases for “working people,” the government must avoid imposing a heavy burden on wealth creators and deterring investors. Given the dismal Conservative legacy, businesses, like the rest of the country, need Labour’s initiative to succeed.